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LLCs Are Found In The Corporations Code But They Are Not Corporations

As one might expect, the California Corporations Code includes California General Corporation Law.  The Corporations Code covers a lot more than corporations, however.  It includes, for example, California's partnership, limited partnership, and limited liability companies.  This doesn't mean that partnerships or LLCs are corporations and it certainly doesn't mean that the General Corporation Law governs their affairs.  

Nonetheless, it is easy to confuse the whole and the part, as did the court in  Petersen-Dean, Inc. v. SolarWorld Ams., Inc., 2018 U.S. Dist. LEXIS 35721.  That case began in state court, but the defendants removed the action to federal court on the basis of diversity jurisdiction, asserting that SWA LLC, a California company, was fraudulently joined.  The federal court ruled that SWA LLC was not a proper party because it had merged into an Oregon corporation.  In support, the court cited California Corporations Code Section 1107 (""[u]pon merger . . . the separate existence of the disappearing corporations ceases. . . .").  However, SWA LLC was a California limited liability company.  As such, SWA LLC's merger with an Oregon corporation would be subject to California's Revised Uniform Limited Liability Company Act and not California's General Corporation Law.  Both the RULLCA and the GCL are found in the Corporations Code, but that doesn't mean the GCL governs LLCs.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...